Eskom’s new just energy transition office assessing green finance options for repurposing of old coal stations
25TH JUNE 2020
BY: TERENCE CREAMER
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Eskom CEO *Andre de Ruyter* reports that the State-owned utility’s newly created just energy transition (JET) project office is evaluating green financing options that could help accelerate the deployment of renewables and facilitate the repurposing of its older coal plants in ways that improve Eskom’s sustainability and sustain livelihoods in coal mining towns.
In a presentation delivered during a South African National Energy Association webinar on Thursday, De Ruyter argued that the JET represented a major opportunity for both Eskom and South Africa and that the office had, thus, been established to ensure that the issue received dedicated effort and attention. ADVERTISEMENT
A JET transaction could also help improve the group’s financial position, which was currently being undermined by its R450-billion-plus debt burden that would only be made sustainable if reduced to R200-billion.
He stressed, however, that there was no “single silver bullet” for addressing the debt problem, with a JET transaction being but one of a range of actions that would have to be taken in the coming months to mitigate the need for yet further fiscal support. ADVERTISEMENT
Some of these debt-reduction options were being debated within the National Economic Development and Labour Council, which is understood to be close to concluding a framework agreement for a social compact on supporting Eskom.
Besides the green transaction, the JET project office would support Eskom’s own decarbonisation objectives, while working on strategies for providing socioeconomic support to those workers and communities that could be left vulnerable by the transition from coal to renewables.
In late March, Eskom issued an expression of interest (EoI) document calling on respondents to outline business cases for the repurposing of the Komati, Hendrina and Grootvlei power stations, which are scheduled to cease producing electricity between 2022 and 2026.
Eskom gave respondents until June 20 to respond to the EoI.
De Ruyter did not offer an indication as to the nature of the responses received, but reported that Eskom was itself already considering various repurposing options for the stations, including:
– the conversion of the plants from coal to renewables; – a conversion to gas; – biomass-to-energy options; – battery energy storage; – the development of processing facilities for coal fines; – the conversion of coal stockyards to coal blending facilities; – acid-mine water processing; and – bulk water supply to farmers and communities.
All the projects were undergoing feasibility assessments, while parallel engagements were taking place with social partners, as well as potential investors and funders.
De Ruyter said a JET transaction could have significant benefits for Eskom and for addressing some of the socioeconomic and environmental challenges being faced in coal mining towns.
For Eskom, possible public-private partnerships for repurposing power stations would create new revenue streams, without drawing on its already stretched balance sheet.
They would also improve its environmental performance and enable it to reskill its workers for new sustainable activities.
For South Africa, the deal could bolster foreign direct investment, create sustainable and alternative livelihoods for coal workers, improve community health outcomes and enable the country to meet its climate commitments.
*ENERGY & INDUSTRIAL POLICY ALIGNMENT*
De Ruyter, who previously headed the Manufacturing Circle, also saw it as an opportunity to reignite industrialisation in South Africa by creating new special economic zones in which renewable component manufacture could take place.
He called for greater alignment between energy and industrial policy along the lines of what government had already done in the automotive sector, which had led to the sustenance of an assembly industry, the growth of automobile exports and the development of domestic supply chains around the industry.
“If we are to have an industrial policy that is aligned to an energy policy, along the lines of the motor industry development programme, there is an opportunity to drive greater local content for renewable energy components. And once we create additional industries and jobs, that will drive additional demand for electricity, which is good for us.”
He also stressed the need for adopting a holistic approach to the transition, arguing that if pursued in isolation there could be negative socioeconomic impacts.
“We have got to take account of the fact that we’ve got high unemployment in South Africa, we’ve got communities and businesses invested in coal that have to be brought along on this journey in a way that does not cause significant hardship.”